Simulations Plus (SLP) Q3 Earnings & Revenues Beat Estimates
Simulations Plus’ SLP third-quarter fiscal 2020 adjusted earnings of 20 cents per share beat the Zacks Consensus Estimate by 233.3% and increased 25% year over year.
Moreover, revenues of $12.3 million surpassed the consensus mark by 16.2% and increased 23.8% year over year. Organic revenue growth was 18%.
Software revenues accounted for 56% of the company’s total revenues, and grew 18% year over year to $6.8 million. Service revenues represented 44% of total revenues and grew 32% year over year to $5.5 million.
Simulations Plus stated that roughly 85% of software revenues and 47% of total revenues in the reported quarter were derived from software renewals, which have experienced no negative impact to date from the coronavirus outbreak.
Moreover, service backlog at the end of reported quarter was more than $12 million, representing more than three quarters’ estimated average service revenues.
Simulations Plus, Inc. Price, Consensus and EPS Surprise
Simulations Plus, Inc. price-consensus-eps-surprise-chart | Simulations Plus, Inc. Quote
However, the company witnessed difficulty in winning new business both in terms of new software licenses, especially in Asia, and new service business during the quarter due to disruption caused by the pandemic.
Segment Top-Line Details
Lancaster division revenues were up 12% year over year to $6.7 million. Markedly, 79% of these revenues were derived from renewals, 10% from new sale, and 11% from consulting services. In the company’s software business, renewal rates remained high at 88% on an account business and 94% on a fee basis. New licensing units grew by 10% year over year.
New regulatory services offering from Simulations Plus generated roughly $250,000 in bookings in the quarter under review. The company added 11 new commercial companies, including new licenses in the United States, Europe, Japan and Brazil. Simulation Plus is engaged in Lancaster in projects with 28 companies and seven funded collaborations.
Buffalo division revenues were up 20% year over year to $3 million. The company inked 33 contracts and initiated 18 new projects in the reported quarter. Overall, Simulations Plus has 64 active projects across 31 companies and 28 proposals outstanding with 24 different companies as of Jul 1.
DILIsym revenues increased 39% year over year to $1.9 million. DILIsym software and service projects represented approximately 55% of revenues. RENAsym model services represented 5%, IPF model services represented 22% and RENAsym grant service revenues represented 10%. Moreover, the heart-failure model contributed revenues of roughly 8%.
DILIsym has 13 active consulting projects and seven active consortium contracts currently.
Notably, Simulations Plus acquired Lixoft, the developer of the highly regarded monolix suite in modeling platform. It covers a wide range of data types and statistical features for population and PK/PD modeling that is widely used by academic, pharma and regulatory agencies.
The buyout expanded Simulations Plus’ footprint in Europe. Lixoft contributed $566,000 of revenues, up 15% year over year.
Operating Details
Gross margin in the quarter under review was 78.3%, up 170 basis points (bps) year over year. Software gross margin was 90% in this seasonally high revenue growth quarter. Moreover, service gross margin increased to 63% based on solid performance by Cognigen division.
Research & development (R&D) expenses as a percentage of revenues decreased 40 basis points (bps) on a year-over-year basis to 6.1%. However, selling, general & administrative (SG&A) expenses increased to 40.8% from 31.1% in the year-ago quarter.
SG&A expenses included $1.1 million in one-time transaction costs related to the Lixoft acquisition.
Total operating expenses as a percentage of revenues were 47% compared with 37.5% reported in the year-ago quarter
Non-GAAP operating income margin declined to 31.4% from 39.1% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of May 31, 2020, cash and cash equivalents were $7.4 million compared with $11.4 million as of Aug 31, 2019.
Simulations Plus established a $3.5 million line of credit with a commercial bank in the reported quarter. Under the terms of the two-year agreement, drawn amounts incur interest at prime rate or at a fixed rate based on LIBOR plus a 175 bps.
Moreover, Simulations Plus declared a cash dividend of 6 cents per share to ba paid out on Aug 3, 2020, to shareholders of record as of Jul 27, 2020.
Zacks Rank & Stocks to Consider
Currently, Simulations Plus has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader computer & technology sector are Calix CALX, SAP SE SAP and CyberOptics CYBE. While Calix sports a Zacks Rank #1 (Strong Buy), both SAP and CyberOptics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calix, CyberOptics and SAP are scheduled to report their quarterly results on Jul 21, 23 and 27, respectively.
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